Do you know where your money is going? Think about it for a minute. Do you really have a clear picture of how much you’re spending every month and what you’re spending it on? Today, I continue my Financial Literacy Month series with a look at the dreaded “B word”. It’s a word that strikes fear into many people. Yes, I’m talking about why you need a budget.

First, I’ll look at why people avoid creating a budget. Then, I’ll flip the coin over and consider the positives of having a budget. I’ll wrap up with one simple thing you can do to get started today.

This post was originally published in November 2020 and updated in August 2023.

Disclaimer: I’m not a financial advisor. Everyone’s situation is different. If you need help with your money, find a qualified financial advisor.

Why people don’t budget

Just hearing the word budget makes a lot of people shudder. According to the 2019 Canadian Financial Capability Survey, less than half of Canadians have a budget. And a 2020 study for Mint showed that two-thirds of American don’t have a clue how much they spend.

The number one reason people give for not budgeting is they feel it’s restrictive. Others are afraid of what they’ll learn so they’d rather bury their heads in the sand.

This article from The Balance provides 5 reasons people give for not budgeting. I’m sure you’ve heard all these excuses before. You might even have used some of them yourself.

I get that sitting down and making a budget won’t be the most fun you’ve ever had. It’s definitely not my idea of a fun Friday night activity. But, let’s set aside the excuses and think about the positive aspects of having a budget.

5 ways a budget could help you

One of the 5 ways to take control of your money is to get organized. Making a budget is an excellent first step to getting organized so you can be in control of your money and achieve your goals.

You probably wouldn’t set out on a major trip with no idea of where you’re going, how you’ll get there, or where you’ll stay when you arrive. Not budgeting is like showing up at the airport with no luggage and getting on the first plane with an empty seat. Some people might find that exciting, but it’s more likely to be a recipe for disaster.

Keeping that in mind, here are 5 ways a budget can help you.

Fewer surprises

In today’s digital world, our money is invisible. We rarely use cash. Our pay is deposited into our bank accounts. We tap and swipe our cards and phones to pay for things. It is so easy to spend that we often spend more than we realize. And, sometimes we spend money we don’t have and are left dealing with the nasty surprise of a big credit card bill.

Creating a budget and keeping track of your spending will help you avoid overspending and give you a clear picture of your finances.

More flexibility and choice

Yes, that’s right. A budget is the opposite of restrictive. On the contrary, it lets you decide what to do with your money. Part of creating a budget is choosing how much money you want to allocate to things that are important to you. A budget gives you freedom to prioritize the things you want most in life. How cool is that?

Less stress

We’ve all had to deal with anxiety from an unplanned expense. A budget can reduce your stress by helping you build savings you can use to cover emergency situations. You’ll be better prepared for those curveballs that life inevitably throws your way.

A budget can also help you get out of debt sooner and save for long-term goals.

And, just knowing you have a handle on your money can help you sleep better at night.

Increased confidence

Not knowing where your money is going could be contributing to a lack of confidence about money.

The Canadian Financial Capability Survey I mentioned earlier shows that people with a budget are less likely to fall behind on their financial commitments. They are also less likely to spend more than they earn, and less likely to need to borrow to meet their day-to-day expenses.

A budget is a first step toward building sound financial habits. Every small win you experience will boost your confidence. Over time, that increased confidence will help you make better decisions about your money.

Easier conversations

Money is an emotionally charged topic and it can cause a lot of issues in relationships. Many couples fight about money or just avoid talking about it altogether.

Sitting down and doing a budget together is a first step toward opening the lines of communication. It gives you a chance to talk about your goals and priorities. And, a budget gives you concrete data to talk about. It’s much easier to take the emotions out of a money talk when you stick to facts and figures.

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One thing you can do to get started today

I’m not going to get into a step-by-step how-to guide on budgeting. A quick search of some of the websites I shared in 5 ways to take control of your money will give you that.

When you’re ready to create your budget, there are a lot of options for tools. You can start with a notebook and paper, or you can use some of the ready-made templates in Excel. In addition, applications like Mint and Quicken make it really easy to create a budget and track your spending. The Canadian government also has an excellent budget planner on their website.

If this all feels overwhelming, don’t worry. The important thing is to start the process. You can decide on the right tools to use later.

The single most important first step you can take is track your spending. For the next month, keep track of everything you buy. This includes bills, your daily coffee, lunches out, lottery tickets…everything. You can do this in a notebook or by using your debit or credit card for every purchase.

Doing this will help you know where your money is going. This is half the battle when it comes to budgeting. Once you have a sense of what you’re spending money on now, you’ll be ready to tackle the rest of the process.

Whatever the reason you’ve been avoiding the task, make a decision today to get started on creating the financial future you deserve. You won’t regret it.

What are some of the other ways a budget can help you? Tell us below.